WMG Walks Away From EMI Purchase Talks

October 31, 2011 at 3:59 AM (PT)

Late last week (NET NEWS 10/27) UNIVERSAL MUSIC GROUP dropped out of the auction for EMI, leaving WARNER MUSIC GROUP owner LEN BLAVATNIK as the leading bidder for EMI.

However, things changed over the weekend, with THE FINANCIAL TIMES reporting BLAVATNIK having walked away from the "$3-4 billion auction for EMI, turning CITIGROUP's attempt to sell the U.K. music company into a tense game of brinkmanship. BLAVATNIK's offer of about $1.5 billion for EMI's recorded music division remained below the price at which the U.S. bank was prepared to sell the asset it seized in FEBRUARY from GUY HANDS' TERRA FIRMA private equity group."

That confirms earlier reports that WARNER MUSIC GROUP was the front runner to buy EMI GROUP's recorded music unit from CITIGROUP INC., with a bid of $1.5 billion to $1.6 billion. Last week, WARNER MUSIC and CITIGROUP were still negotiating expenses related to EMI's pension liabilities.

The sale of EMI PUBLISHING seems not to have hit the same snag as the recording division, with THE FINANCIAL TIMES noting, "negotiations over EMI MUSIC PUBLISHING appeared to have made more progress, with an offer of about $2 billion from BMG, the joint venture between BERTELSMANN and KOHLBERG KRAVIS ROBERTS, beating a bid from a SONY-led group which was still working to secure financing from sovereign wealth funds and elsewhere."

So what's next for CITIGROUP's attempted sale of EMI? Likely, they will get "BLAVATNIK back to the negotiating table, CITIGROUP could retain all of EMI or just its recorded music business in the hope that financing markets improve in the next 12 to 18 months and allow it to restart the auction in a more favorable climate," adds THE FINANCIAL TIMES reports.